Question 1

If the market price is at equilibrium,the producer surplus is minimised.

Accepted Answer

A) True 
 B)False

Question 2

You are given the following market data for Venus automobiles in Saturnia.
Demand: P = 200 - 0.25Q
Supply: P = 130 + 0.10Q
where P = Price and Q = Quantity.
a.Calculate the equilibrium price and quantity.
b.Calculate the consumer surplus in this market.
c.Calculate the producer surplus in this market.

Accepted Answer

a.Price = $150;Quant

Question 3

Marginal cost is the additional cost to a firm of producing one more unit of a good or service.

Accepted Answer

A) True 
 B)False

Question 4

Economists are reluctant to state that price controls are desirable or undesirable because

Accepted Answer

A) it is impossible to evaluate the impact on quantity demanded and quantity supplied as a result of price controls. 
B) whether the gains from the winners exceed the losses from the losers is not strictly an economic question. 
C) sometimes price controls result in increases in economic efficiency and sometimes they result in decreases in economic efficiency. 
D) economists are reluctant to conduct positive analysis of price controls. 
A) it is impossible to evaluate the impact on quantity demanded and quantity supplied as a result of price controls. 
B) whether the gains from the winners exceed the losses from the losers is not strictly an economic question. 
C) sometimes price controls result in increases in economic efficiency and sometimes they result in decreases in economic efficiency. 
D) economists are reluctant to conduct positive analysis of price controls.

Question 5

Figure 5-5   Figure 5-5 shows the market for apartments in Springfield.Recently,the government imposed a rent ceiling of $1000 per month.
-Refer to Figure 5-5.With rent control,the quantity supplied is 200 apartments.Suppose apartment owners ignore the law and rent this quantity for the highest rent they can get.What is the highest rent they can get per month?

Accepted Answer

A) $1000 
B) $1500 
C) $2000 
D) $2300 
A) $1000 
B) $1500 
C) $2000 
D) $2300

Question 6

Producer surplus is the difference between the lowest price a firm is willing to accept for a product and the price it actually receives for the product.

Accepted Answer

A) True 
 B)False

Question 7

The difference between the highest price a consumer is willing to pay for a good and the price the consumer actually pays is called

Accepted Answer

A) producer surplus. 
B) the substitution effect. 
C) the income effect. 
D) consumer surplus. 
A) producer surplus. 
B) the substitution effect. 
C) the income effect. 
D) consumer surplus.

Question 8

If the price of chewing gum is represented by equation P = 25 - 0.5 QD,then the corresponding quantity of chewing gum demanded is represented by the equation

Accepted Answer

A) QD = 2P - 0.5.  
B) QD = 0.5P + 25.  
C) QD = 50 -2P.  
D) QD = -5 + 10P. 
A) QD = 2P - 0.5.  
B) QD = 0.5P + 25.  
C) QD = 50 -2P.  
D) QD = -5 + 10P.

Question 9

When a competitive equilibrium is achieved in a market,

Accepted Answer

A) all individuals are better off than they would be if a price ceiling or price floor was imposed by government. 
B) the total net benefit to society is maximised. 
C) the total benefits to consumers are equal to the total benefits to producers. 
D) economic surplus equals the deadweight loss. 
A) all individuals are better off than they would be if a price ceiling or price floor was imposed by government. 
B) the total net benefit to society is maximised. 
C) the total benefits to consumers are equal to the total benefits to producers. 
D) economic surplus equals the deadweight loss.

Question 10

Figure 5-8  
-Refer to Figure 5-8.Suppose the market is initially in equilibrium at price P1 and now the government imposes a tax on every unit sold.Which of the following statements best describes the impact of the tax? For demand curve D1

Accepted Answer

A) the producer bears a greater share of the tax burden if the supply curve is S2. 
B) the producer bears a greater share of the tax burden if the supply curve is S1. 
C) the producer's share of the tax burden is the same whether the supply curve is S1 or S2. 
D) the producer bears the entire burden of the tax if the supply curve is S1,and the consumer bears the entire burden of the tax if the supply curve is S2. 
A) the producer bears a greater share of the tax burden if the supply curve is S2. 
B) the producer bears a greater share of the tax burden if the supply curve is S1. 
C) the producer's share of the tax burden is the same whether the supply curve is S1 or S2. 
D) the producer bears the entire burden of the tax if the supply curve is S1,and the consumer bears the entire burden of the tax if the supply curve is S2.

Question 11

The actual division of the burden of a tax between buyers and sellers in a market is called

Accepted Answer

A) tax incidence. 
B) tax liability. 
C) tax bearer. 
D) tax parity. 
A) tax incidence. 
B) tax liability. 
C) tax bearer. 
D) tax parity.

Question 12

Figure 5-7   Figure 5-7 shows the market for beer.The government plans to impose a unit tax in this market.
-Refer to Figure 5-7.How much of the tax is paid by buyers?

Accepted Answer

A) $2 
B) $5 
C) $7 
D) $12 
A) $2 
B) $5 
C) $7 
D) $12

Question 13

The incidence of a tax depends on whether the government collects the tax from buyers or sellers.

Accepted Answer

A) True 
 B)False

Question 14

Economic surplus

Accepted Answer

A) does not exist when a competitive market is in equilibrium. 
B) is equal to the sum of consumer surplus and producer surplus. 
C) is the difference between quantity demanded and quantity supplied when the market price for a product is greater than the equilibrium price. 
D) is equal to the difference between consumer surplus and producer surplus. 
A) does not exist when a competitive market is in equilibrium. 
B) is equal to the sum of consumer surplus and producer surplus. 
C) is the difference between quantity demanded and quantity supplied when the market price for a product is greater than the equilibrium price. 
D) is equal to the difference between consumer surplus and producer surplus.

Question 15

If the quantity of sunglasses supplied is represented by the equation QS = -60 + 4P,then the corresponding price of sunglasses is represented by the equation

Accepted Answer

A) P = 0.25QS + 15. 
B) P = 15QS + 240. 
C) P = QS - 7.5. 
D) P = 12 - 0.4QS. 
A) P = 0.25QS + 15. 
B) P = 15QS + 240. 
C) P = QS - 7.5. 
D) P = 12 - 0.4QS.

Question 16

Figure 5-1   Figure 5-1 shows Arnold's demand curve for burritos.
-Refer to Figure 5-1.Arnold's marginal benefit from consuming the third burrito is

Accepted Answer

A) $1.25. 
B) $1.50. 
C) $2.50. 
D) $6.00. 
A) $1.25. 
B) $1.50. 
C) $2.50. 
D) $6.00.

Question 17

Which term refers to a legally established minimum price that firms may charge?

Accepted Answer

A) a price ceiling 
B) a subsidy 
C) a price floor 
D) a tariff 
A) a price ceiling 
B) a subsidy 
C) a price floor 
D) a tariff

Question 18

To affect the market outcome,a price ceiling

Accepted Answer

A) must be set below the black market price. 
B) must be set below the legal price. 
C) must be set below the price floor. 
D) must be set below the equilibrium price. 
A) must be set below the black market price. 
B) must be set below the legal price. 
C) must be set below the price floor. 
D) must be set below the equilibrium price.

Question 19

If the demand curve for a product is vertical,any tax increase on the product is paid for entirely by the consumer.

Accepted Answer

A) True 
 B)False

Question 20

If the quantity of fishing poles demanded is represented by the equation QD = 60 - P,then the corresponding price of fishing poles is represented by the equation

Accepted Answer

A) P = 0.6QD + 10. 
B) P = 60 - QD. 
C) P = -60 + QD. 
D) P = QD + 60. 
A) P = 0.6QD + 10. 
B) P = 60 - QD. 
C) P = -60 + QD. 
D) P = QD + 60.

If the market price is at equilibrium,the producer surplus is minimised.

Marginal cost is the additional cost to a firm of producing one more unit of a good or service.

Economists are reluctant to state that price controls are desirable or undesirable because

Producer surplus is the difference between the lowest price a firm is willing to accept for a product and the price it actually receives for the product.

The difference between the highest price a consumer is willing to pay for a good and the price the consumer actually pays is called

If the price of chewing gum is represented by equation P = 25 - 0.5 Q_D,then the corresponding quantity of chewing gum demanded is represented by the equation

When a competitive equilibrium is achieved in a market,

Figure 5-8 -Refer to Figure 5-8.Suppose the market is initially in equilibrium at price P₁ and now the government imposes a tax on every unit sold.Which of the following statements best describes the impact of the tax? For demand curve D₁

The actual division of the burden of a tax between buyers and sellers in a market is called

Figure 5-7 Figure 5-7 shows the market for beer.The government plans to impose a unit tax in this market. -Refer to Figure 5-7.How much of the tax is paid by buyers?

The incidence of a tax depends on whether the government collects the tax from buyers or sellers.

Economic surplus

If the quantity of sunglasses supplied is represented by the equation Q_S = -60 + 4P,then the corresponding price of sunglasses is represented by the equation

Figure 5-1 Figure 5-1 shows Arnold's demand curve for burritos. -Refer to Figure 5-1.Arnold's marginal benefit from consuming the third burrito is

Which term refers to a legally established minimum price that firms may charge?

To affect the market outcome,a price ceiling

If the demand curve for a product is vertical,any tax increase on the product is paid for entirely by the consumer.

If the quantity of fishing poles demanded is represented by the equation Q_D = 60 - P,then the corresponding price of fishing poles is represented by the equation

Economics: Foundations and Models

Choices and Trade-Offs in the Market

Where Prices Come From: the Interaction of Demand and Supply

Elasticity: the Responsiveness of Demand and Supply

Consumer Choice and Behavioural Economics

Technology, Production and Costs

Firms in Perfectly Competitive Markets

Monopoly Markets

Monopolistic Competition

Oligopoly: Firms in Less Competitive Markets

The Markets for Labour and Other Factors of Production

International Trade

Government Intervention in the Market

Externalities, Environmental Policy and Public Goods

The Distribution of Income and Social Policy

Filters

Exam 5: Economic Efficiency, Government Price Setting and Taxes

If the market price is at equilibrium,the producer surplus is minimised.

Marginal cost is the additional cost to a firm of producing one more unit of a good or service.

Economists are reluctant to state that price controls are desirable or undesirable because

Producer surplus is the difference between the lowest price a firm is willing to accept for a product and the price it actually receives for the product.

The difference between the highest price a consumer is willing to pay for a good and the price the consumer actually pays is called

If the price of chewing gum is represented by equation P = 25 - 0.5 QD,then the corresponding quantity of chewing gum demanded is represented by the equation

When a competitive equilibrium is achieved in a market,

Figure 5-8 -Refer to Figure 5-8.Suppose the market is initially in equilibrium at price P1 and now the government imposes a tax on every unit sold.Which of the following statements best describes the impact of the tax? For demand curve D1

The actual division of the burden of a tax between buyers and sellers in a market is called

Figure 5-7 Figure 5-7 shows the market for beer.The government plans to impose a unit tax in this market. -Refer to Figure 5-7.How much of the tax is paid by buyers?

The incidence of a tax depends on whether the government collects the tax from buyers or sellers.

Economic surplus

If the quantity of sunglasses supplied is represented by the equation QS = -60 + 4P,then the corresponding price of sunglasses is represented by the equation

Figure 5-1 Figure 5-1 shows Arnold's demand curve for burritos. -Refer to Figure 5-1.Arnold's marginal benefit from consuming the third burrito is

Which term refers to a legally established minimum price that firms may charge?

To affect the market outcome,a price ceiling

If the demand curve for a product is vertical,any tax increase on the product is paid for entirely by the consumer.

If the quantity of fishing poles demanded is represented by the equation QD = 60 - P,then the corresponding price of fishing poles is represented by the equation

Economics: Foundations and Models

Choices and Trade-Offs in the Market

Where Prices Come From: the Interaction of Demand and Supply

Elasticity: the Responsiveness of Demand and Supply

Consumer Choice and Behavioural Economics

Technology, Production and Costs

Firms in Perfectly Competitive Markets

Monopoly Markets

Monopolistic Competition

Oligopoly: Firms in Less Competitive Markets

The Markets for Labour and Other Factors of Production

International Trade

Government Intervention in the Market

Externalities, Environmental Policy and Public Goods

The Distribution of Income and Social Policy

Filters

If the price of chewing gum is represented by equation P = 25 - 0.5 Q_D,then the corresponding quantity of chewing gum demanded is represented by the equation

Figure 5-8 -Refer to Figure 5-8.Suppose the market is initially in equilibrium at price P₁ and now the government imposes a tax on every unit sold.Which of the following statements best describes the impact of the tax? For demand curve D₁

If the quantity of sunglasses supplied is represented by the equation Q_S = -60 + 4P,then the corresponding price of sunglasses is represented by the equation

If the quantity of fishing poles demanded is represented by the equation Q_D = 60 - P,then the corresponding price of fishing poles is represented by the equation